by Thomas G. Goddard, JD, MA

Reprinted with permission from Healthplan May/June 1997 (pp. 99-105)
© 1997 American Association of Health Plans. All rights reserved.

Topics do not get any hotter than the quality of health care delivered in a managed care environment. Within that domain, there is nothing more topical than the legal issues relating to the quality of care under managed care.

Doubters can glance at this short sampling of issues: If an HMO does not cover care recommended by a doctor, should it be liable for the patient’s injuries? Are there legal incentives for an HMO to not collect data on quality of care? If the structure of an HMO’s network means that a member drives many miles to a facility rather than to an emergency room two miles away, is the HMO liable under federal fraud and abuse laws? Can an HMO so powerfully incentivize its providers that it violates federal fraud statutes? Should legislators decree specific clinical protocols, such as minimum lengths of inpatient stays or required diagnostic tests?

Key Issues

In the second volume of Faulkner & Gray’s Quality in Managed Care Series, Alice Gosfield’s "Guide to Key Legal Issues in Managed Care Quality" has touched a raw nerve. Legislative hearings do not get more emotional than those in which the issues that make up Gosfield’s book are the topic. Voices rise, arms wave, faces redden, and tears flow when law, policy, health care, and managed care are on a committee’s agenda. There is no question the topic is ripe.

Neither is there a question about the pedigree of the author. Gosfield is among the most articulate health lawyers in the nation, a must-see on the health law lecture circuit, particularly if you are lucky enough to catch her in a debate format. She has spent the last 24 years ranging from the micro-level of provider contracting to the macro-level of the National Academy of Sciences, the National Committee for Quality Assurance, and the presidency of the National Health Lawyers Association. All that remains, then, is whether the book is useful, and, if so, for whom? The introductory chapter tells us that the book is intended to serve as a focused guide, primarily for non-lawyers, to the essential features of the law directly influencing quality in managed care programs. Its reach may indeed be even broader.

The book’s opening chapter seeks to level the reader’s playing field by combining Managed Care 101 with primers in health care quality and the American legal system. Veterans of the health plan arena need only skim the managed care review, but should slow down for the sections on quality and law. This reviewer would have preferred a more thorough taxonomy of the varied indicia of quality than Gosfield provided in her haste to get to the legal issues.

However, she is particularly good in noting some of the more strained definitions of quality.

For example, some providers argue that the selective nature of the provider network itself is an impingement on quality. Physicians who aren’t part of a health plan’s network often charge that disruption of their longstanding relationships with patients who join that plan is poor quality. In contrast, it is the selective nature of the network that plans tout as a quality enhancement. Evaluating the credentials of providers who work for a health plan is a fundamental safeguard of quality.

As one might imagine, however, the meat of this nine-course meal is much more formidable than the appetizer. Chapter 2 launches directly into the issue that physicians, trial lawyers, and HMO general counsels are talking about most: "Who’s Responsible? Liability in Managed Care Caselaw." Gosfield does an artful job of outlining the major theories of plan liability – respondeat superior, corporate negligence, and ostensible agency – as well as those activities of plans that can create liability. The value of this section cannot be overstated. While it will not replace the analysis of corporate counsel, it will be of great value to the non-lawyers running the plan to understand just what the general counsel is telling them.

For too long, despite the warnings of health lawyers, plan executives have assumed that the federal Employee Retirement Income Security Act (ERISA) would protect health plans from any and all tort liability. This book is sufficiently timely to acknowledge recent legal developments that should disabuse any health plan executive of this dated notion.

The chapters on federal quality controls sort out the various sources of federal oversight of health plan quality, particularly the federal HMO Act, federal laws governing Medicare and Medicaid, and federal fraud and abuse laws. This is no dry recitation of federal law, however, but a critical analysis of the impact of the federal regulatory environment on health plan quality. Of particular interest is contributor Robert Roth’s exploration of new notions of fraud prosecution as developed by federal prosecutor Jim Sheehan. Health plan executives should be aware of his view of federal fraud laws as applied to medical necessity, marketing techniques, and enrollment practices.

Also of particular utility is Gosfield’s timely treatment of the Health Care Financing Administration’s new regulation on physician incentive plans (PIP). These regulations require disclosure of plans’ physician incentive mechanisms, and require that plans take certain actions if those systems place physicians at substantial financial risk. Gosfield’s treatment of the PIP regulations, the subject of the liveliest recent discussions among health lawyers, is about as deep as one dare go in explaining this technical issue to the lay reader.

The section of the book that explains the various external accreditation programs is a useful, if brief, synopsis. Again, the book’s timeliness shows up in its reporting of the development of the American Accreditation HealthCare Commission’s (formerly Utilization Review and Accreditation Commission) new network accreditation program and recent trends toward linking accreditation status with regulatory requirements.

Contributor Roth takes up the spicier issue of the growing tendency of state legislatures to use the issue of quality as a hammer against health plans’ most basic management tools. Roth has the substantive advantage of having served in both the administrative and legislative branches of the government of Maryland, a hotbed of anti-managed care legislation over the last several years.

Refreshingly, he is clear-eyed enough to distinguish those efforts he believes are truly rooted in quality concerns – whether valid or not – from those based in the economic motives of other stakeholders in the health care system. He is also savvy enough to note the movement from early, coarse efforts to advantage provider groups with any willing provider laws to the more refined efforts in the second generation of anti-managed care laws. In this latter category he includes mandated point-of-service offerings, disclosure of physician incentives, elimination of so-called "gag clauses," and bills targeting plans’ utilization review practices.

It is surprising that any book could make it to print fast enough to capture the fast-changing scenery in the state legislatures without being hopelessly out of date. The only failing of this chapter is that it tends to overlook the increasingly important role that the National Association of Insurance Commissioners is playing in the development of both health plan standards and mechanisms for the regulation of new risk-bearing health care entities.

I found myself particularly interested in the chapter entitled "What’s the Deal? Contractual Terms Aimed at Quality Control and Risk Management." As Gosfield points out, the basic legal relationship between providers and health plans is set forth in the provider contract, which makes provider/health plan contracts the agreements with the greatest potential impact on quality. The breadth of Gosfield’s understanding shines through in her discussion of such contractual issues as credentialing, peer review, access and availability, medical management system compliance, payment for quality performance, and access to information. As she does throughout the book, Gosfield pays extra attention to the most timely aspects of the issue: so-called gag clauses and without-cause termination clauses.

It is a good thing that this book is interesting and accessible. If it were a tougher read, few people would get to Gosfield’s treatment of medical guidelines and the quantification of quality. That would be a pity, because this is a very important and poorly understood aspect of this subject. Not only does she address the more obvious intersections between law and quality, such as performance measures and report cards, but she also explains less understood subjects such as whether the use of clinical practice guidelines raises or lowers the risk of health plan liability.

In the final chapter, Gosfield becomes Nostradamus and casts her eyes to the next century. As one would hope for in such a chapter, Gosfield unleashes sharp critiques against nearly every player in the health system.

Her targets include the health plan industry, federal and state legislators and regulators, the employer-based American health system itself, and purchasers of health coverage. Health plan executives ignore Gosfield’s admonitions about responsibility at their own risk: "As I say to my teenage son as well as to managed care industry groups when I speak to them, adolescence means taking responsibility. Until fairly recently, the resistance of these organizations to step up to the plate in responding to care gone wrong has been, to me at least, surprising," says Gosfield.

"If health plans are about managing care, their core purpose is to change clinical behavior to a new model. If this management is supposed to produce altered behavior, then the way in which the management is exercised and the behavior it engenders seems to me ineluctably the responsibility of those who are selling their product as a new and better mousetrap."

These are not words of comfort. Yet, they are not words to ignore. Indeed, along with the rest of the book, they are must-read words for CEOs, COOs, CFOs, medical directors, and even for plan lawyers, regardless of their experience.

Alice Gosfield’s enlightening book, "A Guide to Key Legal Issues in Managed Care Quality" is now available directly from Alice G. Gosfield and Associates, P.C.

Originally sold for $145, we can make this 253 page book, originally published by Faulkner and Gray available to you for $95 plus $5 shipping and handling ($100 total prepaid).

For a review, click here.

This book is for non-lawyers. Written in a breezy, informative style, it examines the single most challenging problem in the new era -- quality in managed care. The impact of the law on this effort is central to the critical insights and elucidations offered. In nine chapters, this book addresses fundamental legal principles which pertain to relationships in managed care, caselaw on liability, state regulation of managed care quality, accreditation, typical provider contract provisions which affect quality, federal controls on managed care quality, and issues in performance measurement and data dissemination. Finally, the book outlines the basic questions all of the health care players must address in the day-to-day world as well as in public policy as we grapple with this most vital problem for the American people.

The table of contents includes the following:

Chapter 1:
The Quality of Health Care: Is It Strained?

A discussion of basic principles of quality and value purchasing juxtaposed against managed care techniques. The entities involved in providing managed care and new theories of managed care quality are presented. How the law influences quality is described.

Chapter 2:
Who’s Responsible?: Liability in Managed Care Caselaw

Potentially the most contentious issue in health care today, this chapter looks at the caselaw on ERISA through 1995 which has led to today's patients' rights debate. Anybody who cares about patients' rights needs to understand the matters here.

Chapter 3:
What Big Brother is Watching: Federal Controls on Managed Care Quality

(By Robert L. Roth)

Bob Roth, a veteran health law practitioner in Washington, D.C. wrote this chapter dealing with the role of the federal government generally and the quality control systems which were in place under federal law prior to Medicare+Choice.

Chapter 4:
Carrots and Sticks: The Federal Fraud and Abuse Laws and Quality

It is not well understood that there has long been a concern for quality under federal law. This chapter looks at new theories of quality and false claims, and the government’s authority over exclusions, intermediate sanctions and civil money penalties as they relate to managed care. Anti-kickback laws and the Stark statute are also addressed as they were in effect as of 1995.

Chapter 5:
The Wheat From the Chaff: Accreditation and Regulation

Accreditation entities have multiplied and the way they approach accreditation in managed care varies. This chapter looks at the link between accreditation and regulation and the activities of multiple accrediting bodies including NCQA, JCAHO, URAC and the now defunct TMQC (The Medical Quality Commission).

Chapter 6:
The Little Red Hen Syndrome: States and "Anti-Managed Care" Laws

(By Robert L. Roth)

Bob Roth looks at the ERISA laws and how states launched into solving the problem of managed care reform before the federal government ever picked up the issue. The phenomena he identified continued throughout the country and remain in place.

Chapter 7:
What’s the Deal?: Contractual Terms Aimed at Quality Control and Risk Management

Managed care contracts with physicians and providers include many provisions that go well beyond the payment system or compensation rates. This chapter elucidates those provisions in managed care contracts which are intended to motivate provider behavior with regard to quality.

Chapter 8:
Numbers, Numbers, Who’s Got the Numbers?: Law and the Quantification of Quality

The advent of performance measurement and report cards found its basic iterations in the managed care world. The role of clinical practice guidelines and the implications of HEDIS date are considered along with beginning issues associated with data protection and confidentiality.

Chapter 9:
Back to the Future: Millennial Speculations

This chapter draws together the themes in the book and speculates on the implications of developing trends in late 1995. That which was predicted has come true and one review compared this chapter with the prophecies of Nostradamus!

Modeled on our Fraud and Abuse Compliance Protocol, this 60 pp document breaks down HIPAA Privacy Compliance into understandable steps. With a Glossary, List of Resources, and Key Questions for each of the 8 Steps to Compliance, a medical practice can come to grips with creating a customized, manageable, realistic response to the mandate to have a compliance program in place. Compliance is not a one size fits all proposition, nor is this document a book of forms, although the government’s Business Associate model contract is included. This document helps practices develop their own program without paying exorbitant fees to external consultants who don’t know what you do as well as you know it. Failure to conform to the regulations can lead to fines as well as criminal penalties. This document is available for $75 billed to clients, and $125 prepaid to non-clients.

We do not write compliance plans since we believe that the best compliance plan is one in which the client is fully invested in terms of time and intellectual commitment. We have, however, developed a compliance protocol entitled, "Physician and Medical Practice Compliance Protocol." As with much in compliance, this 42 page document will be dynamic and updated over time. It is available for $75 for clients and $125 for non-clients prepaid.

health-law-handbookNow in its sixteenth edition, the HEALTH LAW HANDBOOK has become a well regarded annual resource edited by Alice G. Gosfield.

This book brings you the insights and knowledge of 19 national health law experts on some of the most important and cutting edge issues in health law today in 14 separate and entirely new articles organized around four significant themes driving health law challenges today: (1) quality; (2) fraud and abuse; (3) regulation in specified industry segments; and (4) communication issues with legal liabilities.

This year’s fourteen articles are grouped as follows:

  • Quality Issues including clinical integration under antitrust written by one of the authors of the FTC’s position on the subject, the role of quality in defining post-merger markets, my article on pay for performance and other quality based contracting issues, and handling disruptive physicians under the ADA;
  • Fraud and Abuse including the annual comprehensive and incisive update by Sanford V. Teplitzky and Craig Holden, an update on EMTALA, the new focus on DME, home health and hospice providers
  • Regulatory mandates regarding office based clinical trials, corporate governance for not for profits after Sarbanes-Oxley and pharmacy benefit managers in the regulatory cross-airs
  • Communication issues including proactive strategies to manage poor clinical outcomes in hospitals, risk management under the HIPAA security regulations, liabilities in e-health initiatives and the legal ethics of lawyer to lawyer communications in health care.

The book is available from WestGroup.

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